Firm under perfect competition operates its plant at sub optimal capacity why ?
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We live in an economy based on scarcity.
Things that are rare cost more. The more access can be restricted, the higher the cost can be, and so higher profits.
Since our economy wants to maximise profits, and thus scarcity, the best way for companies/individuals to do that is to get monopolies, or oligopolies, and then restrict access, and increase prices.
If you produce as much as possible at cost, making no profits, then there is going to be little scarcity for that product, costs are going to be low.
Things that are rare cost more. The more access can be restricted, the higher the cost can be, and so higher profits.
Since our economy wants to maximise profits, and thus scarcity, the best way for companies/individuals to do that is to get monopolies, or oligopolies, and then restrict access, and increase prices.
If you produce as much as possible at cost, making no profits, then there is going to be little scarcity for that product, costs are going to be low.
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